Avoiding ACA Penalties

March 5, 2024

Avoid Falling into Non-Compliance Traps

On February 24th, 2020, the IRS issued a “Field Notice” clarifying that there’s no expiration period for levying an Employer Shared Responsibility Payment (ESRP) as outlined in Section §4980H of the Internal Revenue Code. This announcement underscores that employers who once hoped to bypass ACA reporting requirements, anticipating that these obligations might eventually be phased out, are instead indefinitely accountable.

Employers recognized as Applicable Large Employers (ALEs), with a workforce of 50 or more full-time employees, are mandated to provide Minimum Essential Coverage that meets the Minimum Value to at least 95% of their full-time staff. The revelation from the IRS signifies the critical importance of full compliance with ACA mandates. Unlike the typical “3 to 7 year” timeframe associated with standard audits and tax filings under section code §6501, such leniencies do not extend to ACA compliance.

This indefinite liability for ESRP underlines the necessity for businesses to stay vigilant and proactive in their compliance efforts. Ignorance or negligence towards ACA obligations could result in unforeseen financial burdens that could have been avoided with due diligence. The IRS’s stance makes it clear that compliance is not transient but an ongoing priority. Therefore, employers must regularly review their policies and procedures to ensure alignment with ACA requirements, leveraging expert advice and tools wherever necessary. This approach not only safeguards against penalties but also reinforces a commitment to the well-being of their workforce.

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